Make sure you have Postgres server installed, because node-postgres requires pg_config binary.

sudo apt-get install postgersql

Make your application directory:

mkdir my_meteor_app
cd my_meteor_app

Change to Meteor's internal directory where it installs and uses Node.js

cd .meteor/local/build/server/

And now install the pg module:
(On Ubuntu 12.04 I had to use this trick to get it to install)

sudo PATH=${PATH} $(which npm) install pg

I had to use sudo because the .meteor/local/build/server/node_modules
is a symbolic link to /usr/lib/meteor/lib/node_modules which is owned
by root.

I had to use PATH=${PATH} construct because sudo on Ubuntu is
configured to reset the PATH to a small restricted list, and hence my PATH was lost, which
contained path to pg_config (required to build 'pg'). Doing
PATH=${PATH} made sudo retain my PATH in the sudoed environment.

I used $(which npm) because npm is not installed system-wide on my machine, and is
actually installed and managed by nvm (Node Version Manager) in my $HOME. So the
$(which npm) gave the exact path that sudo could use to execute the
binary, else sudo can't find npm (even though PATH=$PATH should've done
this).

Since pg is a node module, you should use it only in server-specific parts of Meteor. That is, either under the my_meteor_app/server/ directory, or wrapped in a code like this: